Commentary on Economics, Information and Human Action

Starbucks’ energy efficiency competition

Starbucks is having an internal energy efficiency competition among its stores. The goal for each store: reduce energy use by the most during a 30-day period, starting from last Wednesday. 10 stores are involved, and while the article is not specific, it looks like they are all in Washington state.

The goal is to figure out what triggers can successfully prompt actions and whether people will continue to be mindful of conserving energy long after the competition is over, said Andrew deCoriolis, director of marketing and engagement at Lucid Design Group, an Oakland, Calif., startup that is providing the technology for the project. The utility is working with Portland Energy Conservation, a nonprofit in Oregon that designs energy efficiency programs, to run the project.

Each store will have a tablet display behind the counter that shows the electricity use of the store throughout the day. The energy data will come from smart meters and will be updated every one to five minutes, deCoriolis said. Lucid also will be collecting gas and water consumption data, but their use won’t determine who wins the competition. The prize will be some sort of a party for the winning Starbucks shop.

A busy coffee house requires a lot of energy to run. Aside from all the espresso and smoothy making equipment, it has refrigeration boxes for the food at the counter, as well as heating and cooling systems, dishwashers and lighting. And how about all those laptop computers from patrons who hog tables (and wall sockets) for hours at a time?

More competitions like this, from companies that are a visible as Starbucks, would be useful for consumer awareness as well as saving Starbucks money and reducing fuel use. It’s also a good small-scale way for them to pilot test the end-use technology and how the interface with the smart meter works. The rest of the article provides some useful background for Lucid, and a discussion of the fact that with the increasing ubiquity of smartphones and mobile devices like tablets, the energy technology industry has shifted out of hardware and much more toward software, networking, and system architecture and design.

This competition is still only a rough approximation, a blunt stroke at the potential value creation from enabling a truly transactive system. In this competition each store is rewarded for each kilowatt-hour’s reduction … but not all kilowatt-hours are the same. Some are more valuable than others, and in the absence of dynamic pricing and retail choice that enables commercial customers like Starbucks to save even more money by reducing energy use automatically, in response to price signals, in precisely those time periods when the kilowatt-hours are more valuable than what Starbucks is willing to pay for them. That’s the real promise of such technology.

But regulation makes it difficult to have the kind of meaningful, rivalrous competition that would enable entrepreneurs to bring value propositions like this to market, because of the stifling of price signals and the muzzling of economic information transmission that results. A chain like Starbucks could approximate such a transactive system by using Site Controls (now owned by Siemens) to do enterprise energy management and implement an internal transactive system. But for smaller-scale businesses and non-chain operations, their ability to respond autonomously to changes in the value of electricity is stifled by the persistence of regulated fixed retail rates.

I hope we see more such competitions, and that it induces companies like Starbucks to realize that they could save even more money if the used the technology to make their energy consumption choices transactive. Then more companies like Starbucks would advocate for more retail choice, and retail choice is what will bring creativity, economic efficiency, and energy efficiency into the electricity industry.

One thought on “Starbucks’ energy efficiency competition”

If conserving energy is the goal, then the very best way is just to shut the doors, send all the employees home, and not prepare, or sell, any coffee. Starbucks will be astounded at how much their energy bills decline! The point is this: it’s incorrect to think that conservation of energy — or anything, for that matter — doesn’t come with a tradeoff. In my opinion, “energy” is not a more valuable resource than, say, water or labor. The goal should be to maximize sales per unit of resource input, rather than to minimize energy.